Understanding different Business forms
Business forms
Unlimited liability Limited liability (companies)
“The owner of a business is liable for all the “The legal duty to pay business debt stays
with the business not its owners”
debts incured by the business”
Without cash to pay debts they will sell
Includes sole traders and partherships business assets, if this isnt possible they will
Owners may be forced to sell personal close down.
assets to pay of debts To gain limited liability, the business must go
-If the owners cannot pay they may be through incorporation
made personally bankrupt
Private limited
companys (LTD)
Small/medium size
business
Sole trader Often run by a small
“An Individual who runs amount of people or a
and owns their own familt
business” Does not sell public
Can employ as many shares, Shareholders
people as they want cannot sell shares
+ Descision freedom,
simple, Saves on fees Public limited companys
- Risky, takes time, lack Partnerships (PLC)
of expertise, di culty Two or more people start
securing nance due to Limited liability with at least 2
a business without shareholders, usually many
risk forming a company I.e Morrisons PLC
Often found in medicine
and law
+ Descision fredom, Non-for pro ts= Organisations established for
saves on fees welfare, environment, social reasons, not for
- Risky, di culty gaining nancial gain
nance Charity= Non for pro t with the main aim of
raising money
Co-Operative= member owned businesses to
meet a united cause
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Business forms
Unlimited liability Limited liability (companies)
“The owner of a business is liable for all the “The legal duty to pay business debt stays
with the business not its owners”
debts incured by the business”
Without cash to pay debts they will sell
Includes sole traders and partherships business assets, if this isnt possible they will
Owners may be forced to sell personal close down.
assets to pay of debts To gain limited liability, the business must go
-If the owners cannot pay they may be through incorporation
made personally bankrupt
Private limited
companys (LTD)
Small/medium size
business
Sole trader Often run by a small
“An Individual who runs amount of people or a
and owns their own familt
business” Does not sell public
Can employ as many shares, Shareholders
people as they want cannot sell shares
+ Descision freedom,
simple, Saves on fees Public limited companys
- Risky, takes time, lack Partnerships (PLC)
of expertise, di culty Two or more people start
securing nance due to Limited liability with at least 2
a business without shareholders, usually many
risk forming a company I.e Morrisons PLC
Often found in medicine
and law
+ Descision fredom, Non-for pro ts= Organisations established for
saves on fees welfare, environment, social reasons, not for
- Risky, di culty gaining nancial gain
nance Charity= Non for pro t with the main aim of
raising money
Co-Operative= member owned businesses to
meet a united cause
fi
fiffi fi ffi fi
